Project gaullywood full report

Slide1: Project Gaullywood: Project Book Phase I: Market Intelligence and Sector Competitiveness 27th July 2007
Contents: Contents Objectives Background to Project Gaullywood Project Framework Setting the Scene Key Project Findings High-Level Strategic Recommendations Appendices
The objectives of the project were to conduct strategic research on the local and international audio-visual markets for the Gauteng Film Commission (GFC) : The objectives of the project were to conduct strategic research on the local and international audio-visual markets for the Gauteng Film Commission (GFC) Review the GFC’s existing market intelligence and establish gaps. Conduct local and international audio-visual (AV) industry research: Comprehensive analysis of the South African AV industry, Comprehensive analysis of the Gauteng AV industry, Review of global trends, best practices and industry benchmarks. Assess the competitiveness of the Gauteng audio-visual industry: SWOT Analysis, Critical Success Factors. Make high-level Strategic Recommendations: Optimum positioning of the Gauteng audio-visual film industry, Optimal role of the GFC. Consolidate findings and outcomes for submission to GFC Board. Objectives:
Background to the Project: Background to the Project
The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng: The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng GFC Mandate: To promote Gauteng as a preferred film destination, To facilitate transformation of the film industry, To regulate and co-ordinate inter-government communication of permit issuance, code of conducts, municipal by-laws and risk management factors through the development and implementation of provincial film policy, To facilitate, support and promote new investment in film production within Gauteng thereby contribute to economic growth and sustainable job creation, To create and manage a repository of statistical and industry related information, To monitor and support local industry developments, With the approval of the MEC and Board, to provide finance for any projects which will develop filming in the Province, To develop strategic and business partnership and other co-operative activities with the filming and television industry both locally and internationally, To support greater access to and participation in the film and television industry by Previously Disadvantaged Individuals (PDI).
The Gauteng Film Commission (GFC) lacks sufficient market intelligence to adequately fulfil its mandate …: The South African audio-visual industry as a whole is facing a number of challenges: Structural constraints i.e. high volatility, general unprofitability, and monopolised international distribution networks, Prohibitive film production costs and decreasing levels of private production financing, Lack of competitiveness relative to competitor countries, Large volumes of imported material, Increasing reliance on government funds as a means to protect local content development. Rapidly changing consumer tastes and behaviour, with the emergence of new, interactive media platforms and technologies The GFC’s main challenge is that it lacks access to quantitative and qualitative industry data. This has inhibited its capacity to: Adequately respond to the challenges facing the industry, Maximise the competitive advantage offered by this industry. The Gauteng Film Commission (GFC) lacks sufficient market intelligence to adequately fulfil its mandate … Problem Statement:
… and so subsequently requires comprehensive industry intelligence to inform its short-to-medium term strategic objectives: … and so subsequently requires comprehensive industry intelligence to inform its short-to-medium term strategic objectives Project Gaullywood Objectives: A comprehensive contextual and situational analysis of the Gauteng audio-visual market, Reporting on current international and national best practice as regards the activities of Film Commissions/ Offices. Project Scope: Project Gaullywood Output: Key research and analysis findings, including: Global trends, best practices and industry benchmarks, Overview of the Gauteng and SA audio-visual markets. Sector competitiveness assessment: Key challenges and potential opportunities (SWOT analysis), Critical success factors (CSF’s). High-level strategic recommendations: Optimum positioning of the Gauteng audio-visual film industry, Optimal role of the GFC. The resulting market intelligence will form the backbone for the development of a strategic 5–year Sector Development Plan for the GFC.
Project Framework: Project Framework Project Plan Project Charter and Timeline Project Methodology
We defined a high-level project plan that detailed the key activities needed to deliver on the project’s objectives: INDUSTRY MAPPING (As-Is Analysis) 8-12 wks EVALUATION OF FINDINGS 2-4 wks COMPILATION OF REPORT 1-2 wks PROJECT PLANNING & KICK-OFF 2-4 wks Project Administration Project Planning: Clarify project scope Validate project plan and charters Identify key GFC stakeholders Review existing GFC documentation and other available data Establish key areas of research focus and identify any gaps in available data PROJECT MANAGEMENT Bottom-up solution generation Day-to-day project management Client Relationship Management SA AUDIO-VISUAL MARKET ANALYSIS Operating landscape (regional bodies, activities, facilities, market share, initiatives etc) Regulatory environment Financing (incentives and access to funds) GAUTENG AUDIO-VISUAL MARKET ANALYSIS Market activity; demand and supply Competitive positioning Skills and resources Key challenges and potential opportunities Review of the GFC TRENDS AND BEST PRACTISE REVIEW Global trends Best practice and industry benchmarks Develop detailed SWOT analysis Prioritise and validate key issues and potential opportunities Identify critical success factors Consolidate findings and outcomes for submission to GFC board We defined a high-level project plan that detailed the key activities needed to deliver on the project’s objectives Project Plan:
We started by reviewing the GFC’s existing documentation, to establish any gaps in market data : We started by reviewing the GFC’s existing documentation, to establish any gaps in market data PROJECT PLANNING & KICK-OFF (2-4 wks) Project Planning & Kick-off: Project Planning Clarify: Project parameters (scope) GFC expectations and requirements Finalise project team structure and members Meet GFC Management Develop and validate (sign-off): Detailed project plan and charter Detailed project timeline, with key milestones and updates Identify key GFC stakeholders Documentation Review Review existing documentation: GFC documentation e.g. business plans, annual reports, legislation etc Benchmarking and best practice data (trends, case studies etc) Other background information and databases Identify gaps in available data Project Administration [Internal]
We then mapped both the Gauteng and SA audio visual markets, in addition to reviewing industry best practices …: We then mapped both the Gauteng and SA audio visual markets, in addition to reviewing industry best practices … Industry Mapping: SA audio-visual market: Operating landscape: Market activity (complementary and competitive) and facilities resident in other regions in SA; demand and supply Market share and positioning Existence and effectiveness of regional bodies with mandates similar to the GFC Regional development plans and initiatives Regulatory environment: Impact on industry (+ and -) Incentive schemes: Government initiatives (current and future) Impact of current initiatives Funding: Accessibility of funding for projects Sophistication and responsiveness of financial markets to fund applications Market understanding of industry mechanics; evaluation of risk vs. reward etc Gauteng audio-visual market: Market activity and facilities Market demand and supply (products and services); market share Competitive Positioning (location, infrastructure, funding etc) Skills and resource availability: Demographics vs. skills set Local industry expectations and requirements Key challenges and opportunities (SWOT) Overview of the GFC: Mandate and role Structure Operations and activities Strategic objectives Value proposition (natural scenery, expertise, infrastructure etc) Key challenges and opportunities Trends and Best Practice: Trends in the global audio-visual industry Global best practices – other Film Commissions / Offices: Role, mandate, statutory composition, value chain positioning, institutional and revenue models etc Competitor destinations and countries: Regulatory framework Funding and Incentives Product and service offering Locations and Infrastructure Value proposition (destination of choice) Identify critical success factors for: Film Commissions / Offices The audio-visual industry INDUSTRY MAPPING (8-12 wks)
… having chosen to review the Gauteng audio-visual market in relation to both the national and international AV landscapes: … having chosen to review the Gauteng audio-visual market in relation to both the national and international AV landscapes Stream Interface: Understand the global operating landscape - What trends are shaping it? What are the best in the business doing and what can be learnt from them? What’s driving or hindering growth? Understand the NATIONAL operating landscape – What’s the current state of industry? What’s driving or hindering growth, relative to the rest of the world? What trends / factors unique to South Africa are shaping the industry? Understand the PROVINCIAL operating landscape – What’s the current state of industry? What’s driving or hindering growth, relative to the rest of the country? Global Trends and Best Practice Review SA Market Review Gauteng MarketReview Define the STRATEGIC implications of the above - Where do the opportunties for growth / improvement lie? How can this be effected? What is the role of the GFC in this?
Finally, we evaluated our findings to identify potential opportunities for the GFC and Gauteng as a whole : Finally, we evaluated our findings to identify potential opportunities for the GFC and Gauteng as a whole Evaluation of Findings: Collate and synthesise all research and data Develop a detailed SWOT analysis of both the Gauteng and SA audio-visual industries: Identify key strategic issues, potential opportunities and critical success factors for the Gauteng market Engage Steercom and key stakeholders: Validate research and analysis findings Prioritise and validate issues and opportunities Build consensus and secure buy-in Make high-level strategic recommendations Optimum positioning of the Gauteng audio-visual film industry Optimal role of the GFC EVALUATION OF FINDINGS (2-4 wks)
We mapped out a project timeline, with key milestones to measure progress: We mapped out a project timeline, with key milestones to measure progress Timeline and Milestones: Documentation Review SA Market Analysis Best Practice Review Evaluation of Findings Project Planning & Administration Gauteng Market Analysis TASK Wk. 1 - 4 Wk. 5 - 8 Wk. 9 - 12 Wk. 13 - 16 Wk. 17 - 20 Preparation of Report Framework validation Charter sign-off Final Submission Stakeholder Validation Initial Insights First-cut SWOT Analysis 19/2 16/3 13/4 11/5 8/6 29/6 Gap analysis
The project was structured into defined streams of work, with subject matter expertise and research support: The project was structured into defined streams of work, with subject matter expertise and research support Subject Matter Experts (SME’s) Project Team Structure: Global Research Centre (GRC)
Slide16: We employed an issue-driven research approach to source and analyse our primary data … Develop relevant (issue-based) hypotheses Establish key trends and growth drivers Validate key issues, threats and gaps Identify potential opportunities Develop client-specific solutions Activity Provide structure and direction to the research Source factual and meaningful data Gain a clear understanding of the factors influencing the client, and industry or market at large Assist the client to achieve sustainable growth or recovery Objective Develop Hypotheses Analyse Findings Conduct Research Identify Opportunities Research Methodology: Carry out desktop research and analysis Perform an analysis of the client organisation Commission secondary research by GRC & BICS
… and sourced reliable and comprehensive secondary research data from the Deloitte Global Research Centre: … and sourced reliable and comprehensive secondary research data from the Deloitte Global Research Centre The Global Research Centre (GRC): Industry Expertise Professional Research Specialists Tailored Research Access to SME’s globally Vast portfolio of Databases Data Analysis and Synthesis
Setting the Scene: Setting the Scene
The audio-visual (AV) industry is large and complex, with a myriad of role players and sub-sectors: The audio-visual (AV) industry is large and complex, with a myriad of role players and sub-sectors The audio-visual industry: Source: Deloitte Research; GFC Business Plan 2007-2010 The term “audio-visual” is a broad one, covering, amongst others - film, documentaries, video, broadcasting (television and radio), commercials, stills photography, music and multimedia. This content is delivered through numerous channels, such as cinema, television, radio, internet portals, video, DVD, hand-held devices (cellphones, PDA’s) etc. For the purposes of this project, we will primarily be focusing on film, television and commercials. The audio-visual industry provides a platform for the provision of a wide range of specialist services and functions, ranging from script development and film direction to post-production, financing, deal making, distribution, exhibition and broadcasting. The industry structure is thus fairly complex, with a large and diverse number of role players operating across the value chain.
The AV industry value chain contains value enhancing activities and role players that stimulate growth: The AV industry value chain contains value enhancing activities and role players that stimulate growth Value Chain: Source: Deloitte Best Practice Research Pre-Production Production Post Production Distribution Government and Regulators Industry Associations Cost Consumption Revenue Generation
Film Commissions tend to be established at a national or regional level, with a strategic mandate: Film Commissions tend to be established at a national or regional level, with a strategic mandate Source: Deloitte Best Practice Research Film Commission vs. Film Office:
Slide22: We selected 6 diverse comparator countries that would provide appropriate benchmarks for South Africa and the GFC Comparator countries: Source: Key GFC Stakeholders and Industry Experts Country Audio-visual Industry Characteristics
Slide23: We selected 6 diverse comparator countries that would provide appropriate benchmarks for South Africa and the GFC (cont.) Comparator countries: Source: Key GFC Stakeholders and Industry Experts Country Audio-visual Industry Characteristics
We used a number of different sources to establish the extent of audiovisual production in South Africa: We used a number of different sources to establish the extent of audiovisual production in South Africa Production Data Sources: Film: Data on all major films made in South Africa between 2000 and 2006 was sourced from IMDBPro, EU data sources and major SA production /post-production facilities. This includes locally-produced and foreign films, Commercials: CPA Commercial Producers Industry Survey 2006, TV: Information was sourced from industry executives, The above information was cross-checked with industry experts, DTI rebate data and other relevant studies: The data is presented as collected, with no assumptions made regarding unmeasured activity. For Gauteng market data, as far as possible only activity that took place in the province was measured: E.g. for film expenditure, we used only the proportion of expenditure that was spent in the province, This highlights the fact that production does not always occur exclusively in one province; different stages may take place in different provinces.
Key Findings : Key Findings Global Trends and Industry Benchmarks South African AV Industry Overview Gauteng AV Industry Overview
We conducted a review of the GFC’s available market documentation to gain an understanding of any data gaps : We conducted a review of the GFC’s available market documentation to gain an understanding of any data gaps Documentation Review: Review Gap Analysis Review of available GFC documentation: Familiarisation with content thereof Evaluation of GFC documentation to establish the quality of the available data, i.e. Age, scope, source, history, numerical data etc Relevance of data vs. workstream requirements Subsequent identification of any gaps in the available documentation: Provide direction to workstreams around data requirements going forward Evaluation
Global Trends and Industry Benchmarks : Global Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice
Global Trends and Industry Benchmarks : Global Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice
Global growth estimates for the film and television industries in 2003 were 9.4% and 6.3% respectively : Global growth estimates for the film and television industries in 2003 were 9.4% and 6.3% respectively Global Growth Projections: The United States is the leader in the exportation of filmed content Africa imports 70% of its filmed content from the US and 15% from Europe Source: Deloitte Best Practice Research
Traditional industry revenue streams are on the decline worldwide, due to technology convergence, among other factors: Traditional industry revenue streams are on the decline worldwide, due to technology convergence, among other factors Summary of Global Industry Trends: Source: Deloitte Best Practice Research
Slide31: Casting and crewing agents, actors, camera crews etc. National and provincial government, public funds, film commissions etc. Internet portals, DVD, cell phones etc. Suppliers have a low bargaining power, as they are fragmented and small in size and they benefit from the multiplier effect of productions. Numerous players exist offering similar products and services ensures that rivalry among firms is high. Businesses operate in a highly competitive, consumer-driven, and rapidly changing industry. To differentiate themselves, these businesses must develop content; manage talent; and acquire, develop, and adopt new and existing technologies. Threat of new entrants is low, primarily due to the huge capital and distribution (traditional and digital) requirements of the business. New entrants face stiff competition from strong global studio brands. Threat of substitutes is increasing with the proliferation of user-generated content, the internet, and intense competition for consumers’ attention in a fragmenting media world. Businesses compete with each other and all other sources of news, information and entertainment: broadcast television, live events, radio broadcasts, print media and the internet. The impact of continuing customer fragmentation and buying power is high. The combination of increased competition and technologically advanced platforms increases the number of choices available to consumers. This overall change in the industry requires companies to become more responsive to consumer needs. Audiences The industry is being driven by the increasing buying power of audiences and competition between producers of content... Emerging producers, independent producers, new distributors Governments are committed to promoting copyright protection and other intellectual property protection. Public funding and incentives are available to grow local industries and attract foreign productions. Skills development and development of technical infrastructure are high priorities. Audience development is key. Five Forces Analysis: Source: Deloitte Best Practice Research
The global film industry is in a state of flux, as movie theatre attendance stagnates and content delivery channels proliferate: The global film industry is in a state of flux, as movie theatre attendance stagnates and content delivery channels proliferate Industry Snapshot: Source: Deloitte Best Practice Research As part of its efforts to diversify its revenue streams, NBC Universal unveiled plans for an office and residential project on part of its Universal Studio lot, amounting to $3bn (2005) A wave of overbuilding has lead to bankruptcies in the movie theatre business in the US (2005) The world’s most popular search engine, Google, bought out the world’s most popular video sharing portal, You Tube, for $1.65bn (2006) In 2005, the global movie theatre industry’s revenue growth was flat due to declining movie admissions, lacklustre box-office receipts and increased home video spending (2005)
Box office attendance is on the decline globally, primarily due to rising ticket prices: Box office attendance is on the decline globally, primarily due to rising ticket prices Trend: Box Office Attendance Source: Deloitte Best Practice Research In emerging economies however e.g. Mexico, Egypt and Thailand, attendance is on the rise.
In the UK, digital media distribution and an increase in personal movie watching has driven down box office sales: In the UK, digital media distribution and an increase in personal movie watching has driven down box office sales Declining Box Office Attendance: UK Source: Deloitte Best Practice Research Year Revenue UK £M
The high risk nature of big budget films has led to changes in production funding approaches …: The high risk nature of big budget films has led to changes in production funding approaches … Trend: Production Funding Models Source: Deloitte Best Practice Research
… which has forced changes in traditional business models: … which has forced changes in traditional business models Trend: Changing Business Models Source: Deloitte Best Practice Research
In the United Kingdom, the film business model has traditionally been driven by box office sales …: In the United Kingdom, the film business model has traditionally been driven by box office sales … Changing Business Models: UK Source: Deloitte Best Practice Research United Kingdom Traditional Business Model
… however new distribution channels such as online portals are expected to change this: … however new distribution channels such as online portals are expected to change this Changing Business Models: UK Source: Deloitte Best Practice Research United Kingdom Emerging Business Model
The digitisation of film content has led to an increase in piracy …: The digitisation of film content has led to an increase in piracy … Trend: Increased Piracy Source: Deloitte Best Practice Research
… that has in turn led to a shortening of the window period between movie theatre and DVD release: … that has in turn led to a shortening of the window period between movie theatre and DVD release Trend: Shrinking Theatre-to-DVD Window Source: Deloitte Best Practice Research
The digitisation of film production, distribution and exhibition is bringing greater efficiencies to the industry: The digitisation of film production, distribution and exhibition is bringing greater efficiencies to the industry Trend: Digitisation Source: Deloitte Best Practice Research
Digitisation has facilitated the growth of the animation industry: Digitisation has facilitated the growth of the animation industry Trend: Digitisation Source: Deloitte Best Practice Research
Digitisation has facilitated the growth of the animation industry (cont.): Digitisation has facilitated the growth of the animation industry (cont.) Trend: Digitisation Source: Deloitte Best Practice Research
In South Africa, animation is seen as the possible next big break for the industry however challenges exist: In South Africa, animation is seen as the possible next big break for the industry however challenges exist Animation in South Africa is in its infancy and it is fragmented, localised and lacks the availability of cash. The industry has been characterised by short-form animation for TV commercials, corporate videos and the Internet. Short-form animation constitutes the biggest part of the animation industry. Long-form for TV series and film is underdeveloped. It costs between R35,000 and R80,000/minute to produce an animated series and a full-length series could cost between R24M and R45M. The SABC only pays between R7000 and R10000/minute for a highly rated filmed production. Broadcasters need to collaborate with each other to afford the cost of animation production. IDC has shown an interest in investing in animation. It has invested in a series by Red Pepper Pictures and assisted an empowerment group to buy a stake in the Refinery Group, which owns Video Lab. The IDC has indicated that it wants to invest in animation production of international studios and in the development of ideas by South Africans. Building talent and the ability to raise funds offshore are important for South Africa. The Animation Production Training Initiative has been developed to address specific challenges in the animation industry. The objectives of the Animation Production Training Initiative are to: “Provide high quality African animation programmes (13X3 minute short animated films), Develop computer-assisted animation as a way to support development activities, Introduce quality programmes which will provide culturally relevant entertainment for the youth. Act as a catalyst for the development of a self-sustaining African animation industry with the aim of producing quality animation products for the local and international markets. Help build a critical skills and capacity base and address the shortage of black and female representation in South African animation by serving as a bridge between schools and the industry. Create a platform for the experimentation of African imagery in animation.” Trend: Digitisation Source: Deloitte Best Practice Research
The digitisation of film production, distribution and exhibition is bringing greater choice to TV audiences: The digitisation of film production, distribution and exhibition is bringing greater choice to TV audiences Trend: Digitisation Source: Deloitte Best Practice Research
Digitisation has enabled the production of higher quality content that can be distributed faster and cheaper: Digitisation has enabled the production of higher quality content that can be distributed faster and cheaper Trend: Digitisation Source: Deloitte Best Practice Research
In a bid to increase market share and boost revenue, national film industries are now targeting global audiences: In a bid to increase market share and boost revenue, national film industries are now targeting global audiences Trend: Global Entertainment Source: Deloitte Best Practice Research
As a result of technology convergence, online revenue streams are gaining importance: As a result of technology convergence, online revenue streams are gaining importance Trend: Online Revenue Streams Source: Deloitte Best Practice Research
Low budget, high volume films are the driving force behind the success of Nigeria’s film industry: Low budget, high volume films are the driving force behind the success of Nigeria’s film industry Low Budget/High Volume Films: Nigeria 1992 is seen as the year that Nollywood began, when Kenneth Nnebue shot a film called “Living Bondage” and sold 750,000 video copies. It has sales of $200M to $300M a year. Most of Nollywood films are viewed from videos or DVDs. Films cost between $15,000 to $100,000 to make. The financing of the films is mainly from the market and reinvestment by producers from earnings from other films. Filmmakers prefer to finance their films, owning their own copyrights and “renting” their distribution. There are four main distributors in Nigeria and they are becoming involved in the financing of films. Nollywood makes over 2,000 low-budget films a year, which is more than Hollywood and Bollywood. Approximately 1 million people are employed in the industry in Nigeria and it is divided equally between production and distribution, including spin-off jobs. after agriculture. Nollywood’s film industry is watched all over Africa. MultiChoice in South Africa has a channel that shows Nollywood films. Zenithfilms, a British company intends to launch a new channel, called Nollywood Movies on BSkyB. Piracy is a constant problem since the films originate and are distributed on video and DVDs. Measures to reduce piracy include shrink-wrapping cassettes to prove it is an original copy and putting raffle tickets inside the boxes to encourage people to buy the original cassette. The industry has grown with little government intervention. The Nigerian government has indicated that it wants to establish mechanisms to help the industry grow further. There are plans, which are supported by government (using financial incentives) to show Nollywood films in new cinemas that are being built in Nigeria. Expatriate Nigerians have established the Nollywood Foundation in Los Angeles so that links with Hollywood are formed. Source: Deloitte Best Practice Research
Global Trends and Industry Benchmarks : Global Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice
Accessibility and suitability of setting are both industry growth drivers and they play a role in the choice of a location: Accessibility and suitability of setting are both industry growth drivers and they play a role in the choice of a location Physical Location Infrastructure Funding and Incentives Government Support Other Growth Drivers Influencing Choice of Location: Source: Deloitte Best Practice Research
Slide52: In addition, the decision involves a balance between a set of complex economic factors and production requirements Growth Drivers Influencing Choice of Location : Source: Deloitte Best Practice Research Production Location Decision Economic Factors Production Requirements Anticipated Revenue Production Cost Production Capability Talent/Creative Considerations Above the line Below the line Residuals Exchange Rates Govt. Rebates Work Rules Rates Crew Cost Facilities & Equipment Other Work Rules Rates Director/ Actor Requirements Script Requirements Ability to Control Finance Vehicles Infrastructure Crew Depth Crew Quality
Mexico’s technical infrastructure and conducive regulatory environment have helped make it an attractive location: Mexico’s technical infrastructure and conducive regulatory environment have helped make it an attractive location Case Study: Mexico Economic: Modest tax incentives Low Peso exchange rate against the US$ Low cost of labour and materials Major film studio complex which has hosted major international productions e.g. “Dune” and “License to Kill” At least 7 studios and post production houses, where films such as “Titanic” have been made Free permit for street shots in Mexico City Interior shots do not require permits, only notification to officials One permit for all Mexico City boroughs Physical location: Warm and sunny Variety in terrain Historical architecture Proximity to the US Source: Deloitte Best Practice Research Temporary work permit, which allows actors and technicians to enter and leave Mexico without the need for additional permits
The “Made in New York Incentive program” is a good example of the benefits of creating a film-friendly environment: The “Made in New York Incentive program” is a good example of the benefits of creating a film-friendly environment 5% city tax rebate over and above the 10% state tax credit for film and TV shows that are produced at least 75% in New York, Qualifying productions receive promotions on city bus shelters and the city’s TV channel, Discounts on services provided by local vendors, Free parking and police services, Waivering of fees for film and TV shoots, Facilitating the development of large-scale sound stages e.g. Steiner Studios, Reduction of red tape/bureacracy, “Made in New York” branding. Made in New York Incentive program 35% increase in location shooting days in 2005, 20% increase in screen actors guild jobs in 2004, 6000 jobs created for local residents in 2004, 6.7% job growth in motion picture and video production, 9.2% job growth in radio and TV broadcasting, $600 million work of new production business to the city. Results Case Study: New York Made in New York Incentive program Source: Deloitte Best Practice Research
There are a range of both financial and non-financial incentives that are typically used to attract productions: There are a range of both financial and non-financial incentives that are typically used to attract productions Types of Incentives: Source: Deloitte Best Practice Research Tax Incentives Other Financial Incentives Non-Financial Incentives
Incentives are a popular instrument employed by countries to attract productions: Incentives are a popular instrument employed by countries to attract productions Incentive Offerings: Tax rebate - has attracted big-budget productions e.g. “World Trade Centre”, Visa incentive - provides an efficient immigration process for the film industry, Official co-production arrangements between governments e.g. UK, Ireland, Canada. Can apply for benefits or programs of assistance in both countries e.g. tax deductions, refundable tax offsets and investments, International co-production program established to facilitate cultural and creative exchange between co-production countries. Allows countries to share the risk and cost of productions and increase the output of high-quality productions. New Jersey Offers a tax credit which is equivalent to 20% of qualifying production expenses, Exemption from 6% of sales tax, Loan guarantees for up to 30% of financing or $1.5 million. New Mexico Offers a 25% tax rebate on all production expenditures, including local labour costs, Has a loan for up to $15 million per project, if the film production cost is ≥ $2 million, Waives sales tax for film production. New York “Made in New York” incentive program, which includes a 5% city tax rebate over and above a 10% state tax credit, Discounts on services provided by local NY vendors, Waives permit fees for film and TV shoots and extends free parking and police services. Ireland’s tax incentive is attractive due to its quick turnaround times for decision-making and rebate payments, The most important benefit of the tax incentive is the net benefit offered to producers i.e. 20% of the total production budget, The benefit is based on the cost of EU cast and crew working in Ireland, and goods and services purchased in Ireland, up to a maximum value of 80% of the global budget, The ceiling for qualifying expenditure of a film is €35 million. Source: Deloitte Best Practice Research Australia USA Ireland Ireland’s tax incentive is attractive due to its quick turnaround times for decision-making and rebate payments, The most important benefit of the tax incentive is the net benefit offered to producers i.e. 20% of the total production budget, The benefit is based on the cost of EU cast and crew working in Ireland, and goods and services purchased in Ireland, up to a maximum value of 80% of the global budget, The ceiling for qualifying expenditure of a film is €35 million. Ireland
Incentives are a popular instrument employed by countries to attract productions (cont.): Incentives are a popular instrument employed by countries to attract productions (cont.) Incentive Offerings: Advance subsidies for full-length feature productions (new filmmakers); cannot exceed cost of production, up to 50 m Pesetas per film, Subsidies for short features; cannot exceed the cost of the film up to 10 m Pesetas per film, 15-25% subsidies for box office earnings for first 2 years, Incentives for the marketing and exhibition of community films, Protective measures e.g. screen and distribution quotas; designed to restrict the absolute monopoly of the US audio-visual industry. Funds are the single most influential incentive used for the development of the UK film industry, £49.30m of funding available to promote the UK film industry, €70m funds shared equally between production, post-production, distribution, talent development and new technology, A tax credit set at a rate of 30% is available for qualifying UK expenditure. VAT refund as long as at least 6 Mexican film industry services are hired, Incentives are available for co-productions with Mexican companies; $7 m per year in financing available, 10% income tax deduction for investments made in the domestic industry, Article 226 - designed to attract corporate financing by offering companies income tax exemptions equal to investments in domestic productions. Source: Deloitte Best Practice Research Spain UK Mexico
In Ireland, a wide range of financial incentives are offered to help create opportunities for foreign and local involvement in the industry: In Ireland, a wide range of financial incentives are offered to help create opportunities for foreign and local involvement in the industry AV-specific Incentives: Ireland The Section 481 Tax Incentive for film and television made in Ireland. It applies to Feature Films, Creative Documentaries, Television Drama and Animation. The incentive does not apply to Commercials, Reality TV, Game Shows and Soaps. Projects can derive a benefit, net of all fees, of up to 20% of their qualifying expenditure. This benefit is based on the cost of EU cast and crew working in Ireland, and goods and services purchased in Ireland, up to a maximum value of 80% of the global budget. The ceiling on qualifying expenditure for any one film is €35 million. An incentive framework is also available for co-productions between foreign producers and local Irish producers. Source: Deloitte Best Practice Research
The general business environment in Ireland is also supportive of the audio-visual industry: The general business environment in Ireland is also supportive of the audio-visual industry Corporation Tax: Ireland enjoys an EU approved Corporation Tax rate of 12.5% which is the lowest in Europe. This applies to all corporate trading profits. This rate has been the focus of Ireland’s strategy to attract inward investment, creating a favorable economic and fiscal environment which supports industry. Tax Exemptions For Individuals: Individuals may locate in Ireland and enjoy tax-free income for their works under this scheme, known as ‘artist's exemption’. It can apply to writers (including scriptwriters), visual artists and composers. Where individuals become resident in Ireland, they are entitled, on making a claim, to have earnings arising from the publication, production or sale of books, screenplays, plays and musical compositions, disregarded for tax purposes where the work or works involved are original, creative and have cultural or artistic merit. Research and Development Tax Credit: In 2004, the Irish Government introduced a research and development tax credit. It is aimed primarily at research undertaken to acquire new scientific and technical knowledge. It is also aimed at achieving technological advancement directed at new or improving existing materials, products, devices, and systems. In order to qualify it is necessary to achieve scientific or technical advancement and involve the resolution of scientific or technological uncertainty. As the film industry converges with emerging technologies, this may be used by companies advancing research and development in the industry. Zero Rated Value Added Tax: VAT (Sales Tax) is normally charged on the supply of goods and services within Ireland. Foreign film and TV productions carried out in Ireland, can avail of zero rating under section 13a of the VAT act, when the master negative is being exported i.e. visiting filmmakers are exempt from 21% VAT. Foreign producers can work with Irish co-producers, who will arrange the VAT exemption. General Incentives: Ireland Source: Deloitte Best Practice Research
Government financial incentives in New Mexico have helped film productions grow tenfold : Government financial incentives in New Mexico have helped film productions grow tenfold Incentives: New Mexico New Mexico offers a 50% reimbursement of wages for on-the-job training to local residents. The jobs should be advanced below-the-line crew positions. Film Crew Advancement Program (FCAP) The New Mexico Film Office and state government provides incentives and an assistance program that are comparable to the best in the U.S. Some of the highlights include tax incentives and film loans. While assisting the film production industry, the New Mexico Film Office strategy is to train local resources in film industry production techniques. New Mexico markets the region by emphasising its film-friendly government initiatives and available skilled human resources. Due to such initiatives, production in the New Mexico region has grown 10 times in the last two years, reaching $428 million in FY 2006. In 2007 alone, four new soundstages were constructed for operation in New Mexico. Sony pictures is also planning to move some L.A City jobs to Culver City in New Mexico. Government Initiatives Source: Deloitte Best Practice Research
In the UK, public funding is available for a wide range of AV growth initiatives and capacity building: In the UK, public funding is available for a wide range of AV growth initiatives and capacity building Sources of Funding: UK Source: Deloitte Best Practice Research
Both public and private sector funds are available to meet the needs of the AV industry in Spain: Both public and private sector funds are available to meet the needs of the AV industry in Spain Sources of Funding: Spain Source: Deloitte Best Practice Research Private Sector There are a couple of private sector initiatives ranging from the financing of film productions to discount TV contracts, and distribution advances against bank loans. A 5-30% equity initiative is available for co-productions. Public Sector Instituto de la Cinematografia y de las Artes audio-visuales (ICAA): Production, distribution and commercial exhibition. ICAA Mutual Protection Fund: Provides guarantees for access to bank loans for SMME’s in production, distribution, exhibition and technical sectors. Regional Government Funds (grants and subsidies): Development of audio-visual production; international co-productions; script development; new directors; innovative works.
Funding should ideally be spread across the different segments of the value chain, with a focus on areas of greatest need : Funding should ideally be spread across the different segments of the value chain, with a focus on areas of greatest need Funding Distribution: Australia Source: Deloitte Best Practice Research
Revenue generation guarantee requirements are the largest barrier to access to funding in South Africa: Revenue generation guarantee requirements are the largest barrier to access to funding in South Africa Due to the high risk nature of the industry, it is difficult for producers to guarantee income and thus meet the requirements of financial institutions. Broadcaster monopolies on IP ownership limits the income that producers can make from their content. Alternative sources of funding such as the National Lottery are not available due to legal restrictions on the money going to private companies. The combination of the high cost of making films and uncontrollable variables such as audience tastes are a major barrier to accessing funds, by the industry. Barriers to Funding in South Africa: Source: Focus Interviews with Key GFC Stakeholders and Industry Experts
In South Africa, funds from the National Lottery cannot be allocated to private companies in the industry however…: In South Africa, funds from the National Lottery cannot be allocated to private companies in the industry however… Requirements for the Allocation of Funds for Arts, Culture and National Heritage in terms of Section 30 of the Act Application for a grant can be by: A body established to promote the arts, culture or the national historical, natural, cultural or architectural heritage An organisation that does not distribute its income and property to its members, employees, managers, except as reasonable compensation for services rendered Lottery, Act 1997, Regulations Relating to the Allocation of Funds
The audio-visual industry can have a proven positive economic impact on the economy of a region or country: The audio-visual industry can have a proven positive economic impact on the economy of a region or country Economic Impact: Australia Source: Deloitte Best Practice Research N.B. The Australian Bureau of Statistics sets the output multiplier for screen production at 2.67
The audio-visual industry can have a proven positive economic impact on the economy of a region or country: The audio-visual industry can have a proven positive economic impact on the economy of a region or country Economic Impact: States in Australia
The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.): The audio-visual industry can have a proven positive economic impact on the economy of a region or country (cont.) Economic Impact: Ireland Source: Deloitte Best Practice Research
Job creation is often the single largest economic outcome of the audio-visual industry: Job creation is often the single largest economic outcome of the audio-visual industry Economic Impact: UK The UK film industry: Directly supported 31,000 people in 2004, while direct and indirect jobs created stood at 97,500 during the same period. Contributed (including multiplier effect) £3.1 billion to UK GDP in 2004. During the same period, it contributed £850 million to the exchequer. Total inward investment to UK film industry stood at £2.0 billion. Has a highly talented workforce - 46% of the production workforce are university educated, while 31% have graduate level education. Nearly 10-15% of the production work force is from outside U.K. Has undertaken nearly £710 million fixed capital investment in infrastructure and implementation of new technology over the last decade (1990-2000). Has an average salary that is almost double the average national salary (£373,00 vs. £186,500). Pre-production Production Post-production Distribution/ Exhibition Indirect Suppliers: TV and other broadcasting Manufacturing: Equipment, computer/electronics Business Service: Publicity, legal, accountancy Catalytic Effects Induced impacts Skills and labour supply Tourism Merchandising Cultural exchanges Promotion and trade UK Film Industry and Economic Impact Source: Deloitte Best Practice Research
The GFC can better demonstrate the economic impact of the audio-visual industry, so as to lobby government for more resources : The GFC can better demonstrate the economic impact of the audio-visual industry, so as to lobby government for more resources Economic Impact: Creation of jobs Spend on ancillary services Contribution to GDP Spin-off for the tourism industry Skills development Multiplier in South Africa is 2.5 Source: Focus Interviews with Key GFC Stakeholders and Industry Experts
The broader economic competitiveness of a location has an effect on investor perceptions of its attractiveness: The broader economic competitiveness of a location has an effect on investor perceptions of its attractiveness Exchange rate considerations: Australia has benefited from a lower exchange rate against the US $; it has lowered the cost of production relative to the US, The US has however began to benefit from a weaker $ and is attracting back production. Inflation rate / price levels, Economic and political stability, Government commitment to support the industry e.g. the establishment of funds for production, tax incentives, flexible immigration rules etc, Public spending on public infrastructure that is supportive of the AV industry e.g. Information, Communication and Technology (ICT) infrastructure. Source: Focus Interviews with Key GFC Stakeholders and Industry Experts Factors Influencing Perceptions:
The availability of skilled resources, and the flexibility of the labour market, has helped attract productions to competitor countries: The availability of skilled resources, and the flexibility of the labour market, has helped attract productions to competitor countries Technical Expertise: Source: Deloitte Best Practice Research
Productions are more likely to be shot in locations with readily available state-of-the art facilities and high-tech equipment: Productions are more likely to be shot in locations with readily available state-of-the art facilities and high-tech equipment Technical Infrastructure: Source: Deloitte Best Practice Research Australia has a comprehensive range of sound stages, the larger complexes being Central City Studios in Melbourne, Fox Studios in Sydney and Warner Road show Studios on the Gold Coast. Each studio facility offers state-of-the-art sound stages, production offices, editing rooms, construction workshops and water tanks. Also, all are centrally located in the region and near international airports. Australia has a talented and award-winning AV industry (visual effects, post and digital production, music and sound design). Producers are choosing to bring their work to Australia independent of whether they are shooting in Australia or not. Australia’s world-class infrastructure has supported big-budget films such as “Superman Returns”, “Ghost Rider” and “Charlotte’s Web”. High-profile international titles that brought some of their post-production to Australia during 2005/06 include the features “Harry Potter and the Goblet of Fire”, Oliver Stone’s “World Trade Centre”, Merchant Ivory’s production “White Countess” , Chen Kaige’s “The Promise”, Zhang Yimou’s “Riding Alone for Thousands of Miles” and Fred Schepisi’s mini-series “Empire Falls”. Australia Ireland Ireland is seen as an attractive location because it has extensive infrastructure, with film studios in the North, East and West of the country. There about 50 facility companies in Ireland, providing a full range of services to the industry. The main studios in Ireland are located closely to city centres and airports, with well trained and experienced crew bases.
Global Trends and Industry Benchmarks : Global Trends and Industry Benchmarks Global Industry Trends Key Growth Drivers Film Commission Best Practice
The role of a Film Commission typically ranges from facilitating the approval of permits to dealing with trade and investment policy related matters: Roles of Film Commissions: The role of a Film Commission typically ranges from facilitating the approval of permits to dealing with trade and investment policy related matters Source: Deloitte Best Practice Research Roles of Film Commissions Technology Promotion of use of digital platforms Facilitation of government investment in technical infrastructure Logistics Support Liaison with communities and government departments for permit approvals Information sharing Locations assistance Training and Development Support for training initiatives Labour relations assistance Facilitation of the development of digitisation and animation skills Funding and Incentives Funding and incentive support Support for the acquisition of resources Lobbying Facilitation of an enabling policy and regulatory environment Lobbying for the development and implementation of attractive funding and incentives Development of a Film Culture Supporting the development of a screen culture Policy Development and Industry Partnerships Input into policy formulation Partnering with other organisations for marketing and distribution initiatives Marketing Promotion of the audio-visual industry Location marketing Attendance of festivals Lobbying co-production markets Monitoring and Evaluation Market intelligence Impact studies
Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed: Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed Areas of Commonality:
Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed: Certain areas of commonality were identified amongst the Film Commissions / Film Offices that were reviewed Areas of Commonality:
Some differences were identified amongst the Film Commissions / Film Offices that were reviewed: Some differences were identified amongst the Film Commissions / Film Offices that were reviewed Differences:
Slide79: The role of a Film Commission is based on its ability to grow the local industry and create an environment that attracts foreign productions Role of a Film Commission:
Slide80: The role of a Film Commission is based on its ability to grow the local industry and create an environment that attracts foreign productions (cont.) Role of a Film Commission:
Film Commissions have a diverse range of stakeholders within the audio-visual industry …: Film Commissions have a diverse range of stakeholders within the audio-visual industry … Key Stakeholders: Source: Focus Interviews with Key GFC Stakeholders and Industry Experts General Business Community Other Government agencies Companies in the industry Key Stakeholders Municipalities National and Provincial Government Film Producers and Industry Associations Community Media Funders/Financiers
… to whom they need to provide different products and services: … to whom they need to provide different products and services Services Provided to Stakeholders Facilitation Information Dissemination Market Intelligence Advisory Logistics Support e.g. permits Skills Development Support Alignment with Govt. initiatives Funding Assistance Marketing Lobbying Services Provided: Source: Deloitte Best Practice Research
Few Film Commissions focus their efforts consistently within every segment of the audio-visual industry value chain: Few Film Commissions focus their efforts consistently within every segment of the audio-visual industry value chain Value Chain:  Pre-production Production Post-production Distribution            Source: Deloitte Best Practice Research      Australia Film Commission United Kingdom Film Council United States (various) Conafilm (Mexico) Film Commission Spain Film Commission Irish Film Board Gauteng Film Commission 
Ideally, Film Commissions add value by creating an environment that is conducive for the growth of the industry: Ideally, Film Commissions add value by creating an environment that is conducive for the growth of the industry Value Proposition: “Film Commissions should develop and grow the film economy of a region” “Film Commissions should prioritise location marketing and lobby for multiple ownership of rights” “Film Commissions should be the one-stop shop for companies operating along the value chain” “Film Commissions should focus on creating an environment that is conducive for filming and lobby Government on behalf of the industry” “Film Commissions should focus on basic requirements for film productions e.g. permits and information provision” Stakeholder Views “Film Commissions should use innovative means to attract productions, funding and investments to their regions” “Film Commissions should mould themselves according to the needs of the region they operate in” Source: Focus Interviews with Key GFC Stakeholders and Industry Experts
The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng: The Gauteng Film Commission (GFC) is a provincial government agency, tasked with the development and promotion of the audio-visual industry in Gauteng The GFC’s Mandate: To promote Gauteng as a preferred film destination To facilitate transformation of the film industry To regulate and co-ordinate inter-government communication of permit issuance, code of conducts, municipal by-laws and risk management factors through the development and implementation of provincial film policy To facilitate, support and promote new investment in film production within Gauteng thereby contribute to economic growth and sustainable job creation To create and manage a repository of statistical and industry related information To monitor and support local industry developments With the approval of the MEC and Board, to provide finance for any projects which will develop filming in the Province To develop strategic and business partnership and other co-operative activities with the filming and television industry both locally and internationally To support greater access to and participation in the film and television industry by Previously Disadvantaged Individuals (PDI).
The GFC’s stated core functions are not divergent from industry expectations: The GFC’s stated core functions are not divergent from industry expectations The GFC’s Core Functions: Source: GFC Business Plan 2007 – 2010
The value proposition of a Film Commission is dynamic i.e. it evolves as the industry evolves: The value proposition of a Film Commission is dynamic i.e. it evolves as the industry evolves Value Proposition Evolution: Film Commission leads the development of an environment that enables ease of access to permissions, locations, financial incentives and funding. Film Commission engages and develops policies related to the industry such as skills development, investment, exports, research and development. Source: Deloitte Best Practice Research
Full public or full private funding are the two extremes of the continuum of revenue models for Film Commissions : Full public or full private funding are the two extremes of the continuum of revenue models for Film Commissions Hybrid funding models Source: Deloitte Best Practice Research Revenue generation could include: Membership fees, Referral fees, Charges for location services, Staff charge-outs, Levies on movie ticket, DVDs etc, Institutional funding e.g. IDC. Funding Models: The GFC is 99% government funded
The major source of revenue for Film Commissions is usually government funding: The major source of revenue for Film Commissions is usually government funding Revenue Model : Australian Film Commission (AFC) In order to reduce government dependency and to be financially self-sustainable, the AFC is expected to: Source: Deloitte Best Practice Research Foster relationships with organizations and individuals who may be in a position to donate to the national film collection. Forge partnerships with the private sector in key program areas, with a view to securing revenue from industry sources e.g. the Broadband Production Initiative, where the Government’s initial investment was doubled through industry partnerships.
The bulk source of revenue for Film Commissions is usually government funding (cont.): The UK Film Council’s main source sources of revenue are: The bulk source of revenue for Film Commissions is usually government funding (cont.) Revenue Model: UK Film Council Source: Deloitte Best Practice Research Grant-in-aid, Proceeds from the National lottery. A small proportion of funding comes from other sources: NLDF investment income, Funds from other tie-ups / strategic partnerships, International marketing, Sale of research and statistics.
In the US, some Film Offices have been established with limited government involvement or public funding: In the US, some Film Offices have been established with limited government involvement or public funding Revenue Model: Film LA Film LA’s primary revenue comes from permit assistance, assistance with field services and property management. Source: Deloitte Best Practice Research
Film festivals are just one of the many marketing platforms for Film Commissions: Film festivals are just one of the many marketing platforms for Film Commissions Marketing Strategies employed by Film Commissions Develop marketing strategies in collaboration with stakeholders Target international co-production markets Direct marketing to foreign companies Collective marketing of country vs. region Establish interactive websites that facilitate logistics Highlight incentives that support the industry Advertise in key magazines e.g. Hollywood Reporter Marketing Approach: Source: Focus Interviews with Key GFC Stakeholders and Industry Experts Attend and hold Film Festivals
Although National and Regional Film Commissions employ similar marketing strategies, Regional Film Commissions also have a domestic focus: Although National and Regional Film Commissions employ similar marketing strategies, Regional Film Commissions also have a domestic focus Attract foreign productions to the country Information on tax incentives, financing packages and funds Management of a website National Film Commission Promote their regions to foreign and local producers Promote their regions to the domestic industry Location liasion Management of a website Regional Film Commission National and Regional Marketing Strategies
The AFC utilises different types of marketing initiatives to raise the profile of its industry: The AFC utilises different types of marketing initiatives to raise the profile of its industry Marketing Initiatives: AFC Travel Grants E.g. Support for Australian practitioners to attend international festivals, international markets for finance and key international pitching forums International Market Representation E.g. AFC Participation in International Film Festivals Marketing Initiatives National Events and Seminars E.g. Holding feature finance markets and distribution forums Source: Deloitte Best Practice Research Dissemination of Information E.g. via the AFC website
The Irish Film Board aims to maximise the participation of its industry in the international and national marketplace: The Irish Film Board aims to maximise the participation of its industry in the international and national marketplace Marketing Initiatives: Irish Film Board Source: Deloitte Best Practice Research
Strategic industry partnerships often lead to better coordinated marketing efforts: Strategic industry partnerships often lead to better coordinated marketing efforts Industry Partnerships: Australia Ausfilm: Ausfilm is a screen industry-government partnership, comprising some 40 private sector companies, Australia's State and Territory film agencies, and the Australian Government through the Department of Communications, IT and the Arts. Ausfilm works togethe

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